Islamic banks capture 22% of deposits with steady growth in financing

The Islamic banking landscape in Bangladesh continues to demonstrate significant resilience and expansion, serving as a vital pillar of the nation's financial architecture.  ‍

According to Bangladesh bank report, by January 2026, the sector reached a milestone with total deposits in Islamic banks standing at Tk4,74,000 crore, reflecting a year-on-year growth of 9.34% from Tk4,33,000 crore  in the previous year.

Parallel to this, total investments (including Sukuk/Islamic bonds) surged to Tk5,85,000 crore marking an 11.07% increase compared to January 2025.

This dual growth in deposits and investments highlights the increasing public preference for Shariah-compliant financial systems, which operate on the principles of risk-sharing and the elimination of Riba (interest).

The deposits scenario: A deep dive

The banking sector in Bangladesh as a whole experienced an upward trend, with total deposits reaching Tk21,20,000 crore in January 2026. Within this, Islamic banks held a 22.34% market share of total deposits.

The majority of these deposits were mobilized through Mudarabah schemes, which accounted for a staggering 87.26% of total Islamic deposits. Specifically, Mudaraba Term Deposits (MTDR) remained the most popular choice, making up 50.56% of the sector's total deposit base.

Investment scenario and economic purpose

The investment landscape is dominated by full-fledged Islamic banks, which account for 90.84% of all Shariah-compliant investments. The total investment of TK5,85,000 crore is deployed through various modes, with Bai-Murabaha being the most utilized at 44.44%, followed by Bai-Muajjal (17.48%) and Hire Purchase under Shirkatul Melk (HPSM) at 17.19%.

When examining the economic purpose of these investments, the industry sector stands out as the largest recipient, taking up 41.73% of the total funds. This is followed closely by Trade and Commerce at 31.63%, while Construction and Agriculture received 5.73% and 1.19% respectively. This distribution underscores the Islamic banking sector's critical role in fueling industrial growth and supporting the nation's commercial activities.

Pioneering agent banking and digital inclusion

One of the most remarkable achievements of the Islamic banking sector is its dominance in Agent Banking. As of January 2026, Islamic banks held a dominant 54.46% market share of total agent banking deposits, totaling TK26,800 crore.

This represents a robust 27.03% growth from the Tk21,100 crore recorded in January 2025, significantly outpacing the growth rate of conventional banks in this arena. This success is attributed to the expansion of rural outreach and the high level of trust grass-roots depositors place in Shariah-compliant services.

In the realm of Mobile Financial Services (MFS), the sector is still in an early stage but growing. Islamic banking-linked MFS accounts represent 2.01% of total accounts in the banking system, while their share in transaction volume stands at 0.11%. Despite the small market share, transactions such as Cash In (Tk34.2 crore) and Cash Out (Tk61.8 crore) showed positive momentum in January 2026.

E-banking and E-commerce infrastructure

Islamic banks are also investing heavily in digital infrastructure to meet modern demands. The sector currently operates 11,186 electronic machines, including 3,548 ATMs and 6,780 POS terminals. Interbank transactions have seen significant activity, with RTGS (Real Time Gross Settlement) transactions amounting to Tk31,268 crore and EFT (Electronic Fund Transfer) transactions reaching Tk4,980 crore in January 2026. Card-based commerce is also on the rise, with Debit Card transactions reaching Tk9,473 crore during the same period.

Comparison: Islamic vs conventional banking

A comparison of major indicators reveals that while conventional banks still dominate the overall volume, Islamic banks hold substantial ground in specific niches. Islamic banks hold 20.64% of total banking assets (Tk9,17,000 crore vs Tk35,25,000 crore in conventional banks).

In terms of external trade and remittances:

Remittances: Islamic banks handled $725 million (22.87% share) of total workers' remittances in January 2026.

Exports: The sector received $627 million in export proceeds, representing a 17.22% market share.

Imports: Islamic banks facilitated $1.13 billion in import payments, a 19.55% share of the total.

While conventional banks generally outperformed Islamic banks in terms of growth rates for assets and exports during the study period, Islamic banks showed a superior growth trajectory in Agent Banking deposits, widening the gap with their conventional counterparts.

The "Islamic Banking and Finance Statistics" report for January 2026 highlights a sector that is not only expanding but also evolving through digital transformation. With manpower standing at 45,061 employees across 1,741 branches and 976 windows, the industry is well-positioned for further inclusion.

The steady shift toward Shariah-based transactions indicates a great opportunity to expand services into rural areas, ultimately strengthening the financial stability and inclusion of the country. As the central bank continues to issue supportive circulars for Sukuk allotments and Shariah supervision, the future of Islamic finance in Bangladesh appears increasingly integrated and robust.